PPR unlikely to secure majority stake in Puma

Foot Locker the key issue surrounding Puma

LONDON (MarketWatch) -- France's PPR is unlikely to secure majority control of Puma heading into Wednesday's midnight offer deadline, setting up a period of uncertainty for the German sneaker maker which already has leading PPR executives on its board.

According to PPR (012148) on Wednesday, it has now secured control of just over 30% of Puma's (696960) shares. Puma investors have until midnight to accept PPR's 330 euros a share, or 5.3 billion euros ($7.1 billion), offer.

PPR will report the results of its takeover bid next week, and subsequently an automatic two-week offer extension will be triggered, a company spokeswoman said. She repeated that PPR has no intention of improving the offer.

By squeaking past the 30% threshold, PPR will be able to go into the open market and buy Puma stock without triggering another takeover offer.

Mark Josefson, an analyst at Kepler Equities, doesn't expect a better bid -- in the short term at least.

"The end game must be for PPR to take control of Puma," he said. "At the moment if they spend $100, 70% of that goes somewhere else."

PPR now does have a degree of control over Puma. In addition to its stake, the French owner of PPR stores and Gucci Group has three members on Puma's supervisory board, including Francois-Henri Pinault, who is now chairman of Puma in addition to chairman and chief executive of PPR.

Foot Locker impact

Puma's been able to double its market share in the U.S. over the last two years through reliance on Foot Locker
FL, -1.39%
but the retailer is now shifting shelf space away from Puma - as it has done in the past to Nike
NKE, +0.33%
Adidas (500340), and Reebok, which is now a division of Adidas.

That's forced Puma to find alternative distribution channels in the U.S. to Foot Locker.

"This is a process Puma would have to do anyway. PPR ownership isn't going to be a deterrent, but in the near term I don't see major benefits," Kepler's Josefson said.

He has Puma rated at hold - the only hold rating of the 11 stocks he covers.

"I think 330 euros is a strong support," he said. But the U.S. issue will overhang the stock for the next few quarters until it can line up new distribution.

UBS in a recent analyst note agreed.

"In the coming quarters, growth should be limited as consumers have filled their wardrobe with low-profile sneakers," said Bernd Janssen, an analyst for the Swiss brokerage.

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